Optimizing Public Infrastructure Investment: Evaluating Government Expenditure Efficiency and Economic Growth in Nigeria

This study therefore examined the effect of government expenditure on infrastructural development and its influence on economic growth in Nigeria from 1999-2022. Using secondary data obtained from the Central Bank of Nigeria, World Development Indicators, and African Infrastructure Development reports, the paper adopts the Autoregressive Distributed Lag (ARDL) model to investigate short-, mid-, and long-run relationship between public expenditure and gross domestic product (GDP). Augmented Dickey-Fuller (ADF) test results support that the variables are integrated at mixed order of integration, and it validates the use of ARDL framework. The results of the bounds test suggest a strong mutual long-run equilibrium linkage between government spending on infrastructure and economic growth. The empirical findings show that only capital spending is statistically significant and positive for GDP in the short-run but that both health and education recurrent spending are generally either insignificant or negative for growth. The significance and the correct sign of the error correction term is indicating partial speed of adjustment towards long-run equilibrium with 1.5% per annum. Post-estimation diagnostic tests support robustness of the model as no problem in serial correlation, heteroscedasticity and residual normality is indicated. The study concludes that capital spending boosts short-run growth but inefficiency in recurrent outlays restricts its developmental outcomes. Based on the findings, policy recommendations included enhancing the effectiveness and FDI-sectoral composition of government expenditures, mainly through the health and education sector, to promote inclusive and sustainable economic growth. The paper then makes suggestions for further research into disaggregated expenditure analysis and governance and public finance outcomes.